A MANOGNA,HYDERABAD vs INCOME TAX OFFICER, WARD-8(1), HYDERABAD

Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD

Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN

PER Smt. P. MADHAVI DEVI, J.M. : This is assessee’s appeal against the order of the Commissioner of Income Tax (Appeals)-6, Hyderabad, dated 19-02-2018. Assessee has raised the following grounds of appeal:

“1. The order of the Ld. Commissioner of Income Tax (Appeals)-6, Hyderabad ('CIT(A)') in sustaining the observations of the Ld. Assessing Officer ('AO') proposing to assess income from Long term capital gains in the AY 2011-12 is wholly erroneous and unsustainable in facts as well as in law. 2. The CIT(A) erred in not following the order passed by the Hon'ble Income Tax Appellate Tribunal, Hyderabad ('ITAT') in ITA No.

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993/H/2005 dated 5.8.2016 merely on the premise that there was no ruling of the Supreme Court available and that no decision in favour of the Department was brought to the notice of the ITAT. 3. The CIT(A) failed to note that the ITAT, Bench had in its order dated 05.08.2016 concluded the issue raised by the AO and the CIT(A) in favour of the Appellant which had attained finality and therefore the CIT(A) erred-in confirming the order passed by the AO. 4. The CIT(A) failed to note that the AO had no jurisdiction to pass an order proposing for the assessment in AY 2011-12 in the assessment proceedings for AY 2008-09 and therefore grossly erred in sustaining the observations made by the AO. 5. Without prejudice to any of the aforesaid grounds the CIT(A) failed to note that subsection (4) of Sec. 54F uses the word "construction" and not 'constructed' and therefore erred in holding that the Appellant had not complied with the conditions laid down in Sec. 54F of the IT Act. 6. Any other ground(s) that may arise at the time of hearing”.

Brief facts of the case are that, the assessee, an individual, filed her return of income for the AY. 2008-09 on 30-07-2008 declaring income of Rs. 1,220/-. The case was selected for scrutiny under CASS and accordingly assessment was completed u/s. 143(3) of the Income Tax Act [Act] dt. 30-12-2010.

2.1. During the assessment proceedings, Assessing Officer called for certain information which was furnished by the assessee and it was observed that the assessee has sold shares for a total consideration of Rs. 5,00,00,224/- on 29-11-2007 and has arrived at capital gains of Rs. 4,71,52,450/-. After meeting the expenditure for purchase of plot, registration fees and expenditure towards development, balance amount of Rs.

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1,46,00,000/- was deposited with SBI, Balanagar Branch under Capital Gains Account Scheme and assessee had put to use the entire capital gains arising out of sale of shares, by 30-11-2010.

2.2. Assessing Officer observed that during the course of scrutiny proceedings, assessee has furnished bank statements and capital gain account, which shows that as on 30-11-2010, entire amount was withdrawn from the bank for construction of a residential house. An inspection was conducted by the Department (office) on 06-12-2010 and it was found that the construction of house is in progress and it is only in preliminary stage, wherein only pillars have been laid and even roof was not laid. Therefore, assessee was summoned u/s. 131 of the Act, wherein assessee confirmed the stage of construction of the building. Assessing Officer observed that as per the provisions of Section 54F, assessee should have completed the construction within a period of three years from the date of transfer, whereas assessee’s construction was not completed within the stipulated time. Therefore, he observed that deduction u/s. 54F is not allowable. However, he observed that the same is to be brought to tax in the year in which the period of three years expires and therefore, he held that the capital gains are to be brought to tax in the AY. 2011-12.

2.3. Aggrieved, assessee preferred an appeal before the CIT(A). Meanwhile, the assessment for the AY. 2011-12 was

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re-opened and the issue of capital gains and exemption u/s. 54F was considered by the Assessing Officer and the matter travelled upto ITAT. The Co-ordinate Bench in ITA No. 993/Hyd/2005, vide order dt. 05-08-2016, upheld the findings of CIT(A) that assessee is entitled for exemption u/s. 54F since the entire capital gains have already been utilised by the assessee by the end of the three year period. Meanwhile, CIT(A) came to dispose of the appeal for the relevant assessment year before us i.e., AY. 2008-09 and held that assessee is not entitled for exemption u/s. 54F of the Act and upheld the findings of Assessing Officer that capital gains are to be brought to tax in the AY. 2011-12. Therefore, he confirmed the assessment order. Aggrieved, assessee is in second appeal before us.

We find that the issue as to whether the capital gains arise in AY. 2011-12 and whether assessee is eligible for deduction u/s. 54F has been considered by the ITAT in assessee’s own case for the AY. 2011-12 and it has been held that assessee is eligible for exemption u/s. 54F of the Act. It has not been brought to our notice by the Ld.DR that there has been any challenge to the order of the ITAT for the AY. 2011-12 and therefore, the order of the ITAT has become final. Since the ITAT has already given a finding, it is not open to CIT(A) to take any other view at this stage and to hold that the entire capital gains are to be taxed in the AY. 2011-12, because construction of the residential house is not completed within the period of three years from the date of transfer.

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Therefore, we set aside the order of CIT(A) and allow the grounds raised by assessee.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 30th January, 2019

Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 30th January, 2019 TNMM

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Copy to :

Smt. A. Manogna, C/o. Sekhar & Co., 133/4, Rashtrapathi Road, Secunderabad.

The Income Tax Officer, Ward-8(1), Hyderabad.

CIT(A)-6, Hyderabad.

Pr.CIT-6, Hyderabad.

D.R. ITAT, Hyderabad.

Guard File.

S.No. Details Date 1 Draft dictated on 16-01-19 2 Draft placed before author 17-01-19 3 Draft proposed & placed before the Second Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement 7 File sent to Bench Clerk 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order

A MANOGNA,HYDERABAD vs. INCOME TAX OFFICER, WARD-8(1), HYDERABAD